North Korea's Deepening Economic Ties With China

By Scott A. Snyder

Trade between the two countries undercuts sanctions and makes Pyongyang less likely to reform

A fishing boat docks at the port area of North Korean Special Economic Zone of Rason City / Reuters

Yonhap reported this week that North Korea's trade dependence on China has climbed
as China's proportion of North Korea's overall foreign trade has risen
from $1.97 billion, representing 41.6 percent of North Korea's overall
trade in 2007, to $3.47 billion, representing 57.1 percent in 2010. The
report compares trends in China-North Korea trade relations with
inter-Korean trade trends, which despite heightened tensions show a
slight increase in trade volume from $1.8 billion in 2007 to $1.91
billion in 2010. But because of the growth in China's trade with North
Korea, inter-Korean trade as a proportion of North Korea's overall trade
has dropped from 38 percent in 2007 to 31.4 percent in 2010.

South Korea's perceived failure to compete with China for economic
influence in the North as a result of heightened tensions in
inter-Korean relations remains an active subject of frustration in South
Korea, especially among progressives, but North Korea's continued
pursuit of nuclear and missile tests and other tension-raising
provocations against the South make it clear that China has been unable
to use the North's economic dependency on Beijing as a tool for imposing
political restraint on Pyongyang.

In my presentation two weeks ago,
the third in the series, I reviewed economic trends in the China-DPRK
relationship, including the apparent economic competition between China
and South Korea for trade share with North Korea during the Roh Moo Hyun
administration (2003-2007) and the widening gap in China's and South
Korea's shares of North Korea's trade under the Lee Myung Bak
administration. I also highlighted China's strenuous efforts to strengthen high-level contacts,
a strategy that appears to be paying off when one considers that Kim
Jong Il has visited China on four occasions during the past two years
(the latest being on his return from Russia last August) following a dip
in high-level contacts in the year following North Korea's first
nuclear test in 2006.

In my presentation, I identified five contradictions that surround China's current approach to North Korea:

China continues to expand economic engagement with North Korea
while the United States and South Korea emphasize sanctions
implementation under UN Security Council Resolution 1874. The United
States and South Korea have closed the front door of the barn while the
back door to China is wide open, mitigating the likelihood that a
sanctions-only approach to North Korea will achieve U.S. policy
objectives.

China's highest priority for North Korea is to safeguard regional
stability, yet China's emphasis on North Korea's development professes
to encourage North Korean reform. Can China encourage North Korean
reforms and stability at the same time?

China's actions to promote stability in North Korea increasingly
contradict China's professed commitment to non-interference in the
internal affairs of others.

Despite North Korea's economic dependency on China, it is striking
that China finds itself with little leverage to influence North Korea
without the effects of those actions having negative consequences for
China. As a result, North Korea offers nothing to China in return for
its help. This is because North Korea views China's assistance as in
China's own interest (thus, it is unnecessary for North Korea to
reciprocate).

Whose side is time on? China's preference forgradual, non-disruptive
change in North Korea might inadvertently provide North Korea with the
time and space necessary to become a more formidable and disruptive
source of threat to regional stability.

The question of whose side is time on remains most directly relevant to policymakers, and it continues to influence prospects for cooperation among North Korea's neighbors
depending on whether one believes that proliferation or instability is
the more likely risk that policymakers will face as they attempt to
coordinate policy toward North Korea.